MASTER 

NEGATIVE 

NO.  94-82063- 10 


COPYRIGHT  STATEMENT 


The  copyright  law  of  the  United  States  (Title  17,  United  States  Code) 
governs  the  making  of  photocopies  or  other  reproductions  of  copyrighted 
materials  including  foreign  works  under  certain  conditions.  In  addition, 
the  United  States  extends  protection  to  foreign  works  by  means  of 
various  international  conventions,  bilateral  agreements,  and 
proclamations. 

Under  certain  conditions  specified  in  the  law,  libraries  and  archives  are 
authorized  to  furnish  a  photocopy  or  other  reproduction.  One  of  these 
specified  conditions  is  that  the  photocopy  or  reproduction  is  not  to  be 
"used  for  any  purpose  other  than  private  study,  scholarship,  or  research." 
If  a  user  makes  a  request  for,  or  later  uses,  a  photocopy  or  reproduction 
for  purposes  in  excess  of  "fair  use,"  that  user  may  be  liable  for  copyright 
infringement. 

The  Columbia  University  Libraries  reserve  the  right  to  refuse  to  accept  a 
copying  order  if,  in  its  judgement,  fulfillment  of  the  order  would  involve 
violation  of  the  copyright  law. 


Author: 

National  cloak,  suit  &  skirt 
manufacturers'... 

Title: 

Cost  finding  in  the  cloak 

and  suit  industry 

Place: 

Cleveland 

Date: 

[1912] 


MASTER   NEGATIVE   # 


COLUMBIA  UNIVERSITY  LIBRARIES 
PRESERVATION  DIVISION 

BIBLIOGRAPHIC  MICROFORM  TARGET 


ORIGINAL  MATERIAL  AS  FILMED  -    EXISTING  BIBLIOGRAPHIC  RECORD 


RESTRICTIONS  ON  USE: 


RLM  SIZE:  .^mm 


w* 


"BtrsiNiKia' 
430.38 

N213    National  cloak,  suit  &  skirt  manufacturers*  asso- 
ciation* 

Cost  finding  in  the  cloak  and  suit  industry. ••• 
Cleveland,  0.,  National  cloak,  suit  &  skirt  mfrs. 
ass'n. ,01912. 

cover-title,  19  p.   table,  fold.diagr.   26  cm. 


I 


o 


TECHNICAL  MICROFORM  DATA 


REDUCTION  RATIO:    l^-l 


IMAGE  PLACEMENT:  lA  (  llAy  IB      IIB 


DATE  FILMED:  5-.^-^^ 


TRACKING  #  : 


MSkj    OoTitf 


INITIALS:  iCUS 


FILMED  BY  PRESERVATION  RESOURCES,  BETHLEHEM,  PA. 


00 

3 
3 


0) 

o  >> 

lOQ  ^ 

3  X 

O  ^ 


c/)  ^ 

I  "^ 

^J  CO 


r\3 

00 

CJl 
(J)X 

OOM 
O 


Ul 

3 


> 

o  m 
Q.~n 

oo"o  -o 

CO 


X 


X 


.a*^' 


.'S' 


^ 
^<i/ 


,'b'^i 


a^ 


.-^^ 


xP? 


^ 


>>" 


-rl 


''i5 


o 

3 
3 


\&^ 


ife, 


o 
o 

3 
3 


<<^ 


V 


fe 


^O 


^ 


^fd> 


^1^ 


fvT 


O 


o 


00 


b 


bo 


ro 
In 


1.0  mm 


1.5  mm 


2.0  mm 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 
abcdefghi|klmnopqrstuvwxyzl234567890 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 
abcclefghijklmnopqrstuvwxyzl234567890 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 

abcdefghijklmnopqrstuvwxyz 

1234567890 


V 


^ 


€= 


^O 


'^ 


f^ 


^f^ 


m 

H 

O 
O 

■0  m  -o 

>  C  CO 

I  TJ  ^ 
0(/)     ; 

m 

3) 

o 

m 


2.5  mm 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 

abcdefghijklmnopqrstuvwxyz 

1234567890 


•I 
fS 

Is 

Si 

<<  a» 
IM  CO 

^-< 

00  tM 

o 


^o 


1— • 

ro 

Ol 

o 

= 

3 
3 

CT 
O  > 

Is 

^i 
|o 

*<  3D 
N  C/5 

cn< 
a>x 
^-< 

OOM 

o 


^. 


/^, 


i.:-j«^^ajwfl 


tis^ 


^ 


COST  FINDING    IN   THE    CLOAE 
AND   SUIT    INDUSTRY 


'  m 


IOrJj--L,  CLOi  K .    '"HIT    '    3KIST 
"'Aini?AOTimERS  ASPOC. 


I 


LIBRARY 


School  of  Business 


COST  FINDING 


IN  THE 


CLOAK  AND  SUIT  INDUSTRY 


1 


Copyright  Applied  for 

Issued  Under  Direction  of 

THE  NATIONAL  CLOAK,  SUIT  &  SKIRT  MFRS.  ASS'N 

310-311  New  England  Building 

Cleveland,  Ohio 

NET  COST  $2.00  PER  COPY 


Copyrighted  1912 

By    PHILIP    VRANKEL 

develand,  Ohio 


S3 


.^ 


n 


9» 


u> 


yOU4»vv-*^^ 


PREFACE 


r 


At  the  meeting  of  the  National  Cloak,  Suit  and 
Skirt  Manufacturers'  Association  held  in  April,  1912, 
the  Welfare  Committee  was  charged  with  the  duty  of 
selecting  and  assigning  Expert  Cost  Accountants  to 
the  compiling  of  a  uniform  cost  accounting  system 
which  would  be  applicable  to  the  factory  of  each  mem- 
ber of  the  Association. 

Those  are  long  involved  words,  and  yet  they  ex- 
press something  that  each  of  us  should  be  familiar 
with  now,  and  undoubtedly  should  have  appreciated 
long  ago. 

Probably  had  our  attention  been  directed  to  a 
lesser  degree  on  other  problems,  seemingly  more  im- 
portant and  pressing,  accounting  methods  in  our  fac- 
tories would  be  today  in  a  more  advanced  state. 

Style  has  been  our  overshadowing  problem  in  the 
past  and  it  is  a  problem  that  is  calculated  to  require 
the  full  time  and  increasing  attention  of  anyone  who 
is  connected  with  its  endless  variations. 

Cost  accounting  means  not  only  figuring  out  the 
cost  of  the  individual  garment  and  the  getting  of  data 
which  will  show  the  cost  of  operation,  but  the  analyz- 
ing of  this  data  in  such  a  way  as  will  enable  us  to 
reduce  those  costs.  The  Cost  Accounting  System  not 
only  gives  us  the  cost  of  these  garments  at  any  one 
time,  but  it  enables  us  to  compare  with  the  costs  of 
the  same  garment  a  year  ago  or  six  months  ago,  and 
also  with  a  possible  cost  that  can  be  achieved  within 
the  three  months,  or  within  six  months  in  the  future. 


It  is  in  the  comparison  of  the  cost  records  of  this 
season  with  the  past  season  and  the  past  year  with 
the  coming  year  that  its  enormous  value  becomes  pos- 
sible. 

In  addition  there  is  the  further  possibility  of  com- 
parison with  other  manufacturers.  Human  beings 
differ.  They  differ  in  their  skill.  They  differ  in  their 
abilities,  and  have  different  aptitudes.  One  manu- 
facturer in  his  factory  may  be  able  to  reduce  his  cost 
in  one  department  and  another  may  be  able  to  reduce 
his  cost  in  another  department,  due  to  particular  in- 
terest or  particular  skill  in  those  departments,  and  the 
comparison  between  the  two  will  show  different  facts 
and  enable  each  man  to  avail  himself  of  the  reduced 
cost  possible  in  both  departments.  That  is  why  it  is 
so  important  that  this  association  should  have  a  uni- 
form method  of  cost  accounting. 

Cost  accounting  will  not  at  first  glance  seem 
easy,  because  there  are  few  of  us  that  are  accountants. 
Therefore  most  of  us  will  be  tackhng  a  problem 
that  is  new  and  strange.  Any  problem  that  is  new 
and  strange  seems  ever  so  much  more  difficult  than 
it  is,  but  cost  accounting  is  so  important  and  so  valu- 
able to  each  one  of  us,  that  even  in  those  houses  where 
there  are  no  trained  accountants,  this  system  should 
be  introduced  at  the  very  earliest  moment  possible. 

So  don't  let  us  be  deterred  by  the  strangeness  of 
it.  I  acknowledge  freely  these  things  have  been 
strange  to  me.  I  never  had  anything  to  do  with  keep- 
ing any  set  of  books,  and  I  dare  say  there  are  a  great 
many  other  members  of  our  association  that  are  in 
the  same  predicament.  No  matter  how  difficult  it 
may  seem  to  those  of  us  who  are  inexperienced,  in 
accounting,  let  each  one  of  us  select  that  particular 
member  of  his  organization  that  knows  most  about 
accounting  and  put  him  in  charge  of  this  work,  and 
if  his  knowledge  be  insufficient,  let  us  add  to  it  the 
temporary  services  of  an  expert,  in  order  that  the  sys- 

2 


M 


(' 


tem  may  be  installed  at  the  earliest  possible  moment. 
It  will  be  well  worth  the  effort. 

If  there  be  more  than  one  individual  member 
of  any  particular  organization,  if  it  is  left  to  three  or 
four  different  people,  nobody  will  do  it.  Let  each  firm 
select  one  individual  and  make  him  responsible  for  the 
early  installation  of  this  cost  accounting  system. 
And  don't  let  us  make  the  time  too  long.  Three 
months  ought  to  be  ample  and  sufficient  time.  The 
benefits  will  come  after  it  has  been  introduced  and 
the  benefits  will  be  increasing  as  the  years  go  by,  so 
that  the  slight  initial  effort  that  may  be  necessary  to 
overcome  our  past  inertia  will  be  very  wisely  expended. 

Morris  A.  Black,  Chairman, 
1  HE  Welfare  Committee. 


f 


COST   FINDING 
IN  THE  CLOAK  AND  SUIT  INDUSTRY 

How  can  the  man  making  cloaks  reduce  his 
expenses,  reduce  his  costs?  This  is  the  practical 
question.  If  a  cost  system  does  not  help  him  to  do  this 
it  is  no  good,  time  and  money  are  wasted  keeping  it  up. 

In  order  to  find  out  where  money  can  be  saved, 
we  divide  all  expenses  under  three  general  divisions. 

Materials 

Labor 

Charges 

but  it  is  important  to  know  whether  as  to  all  garments 
which  item  costs  most,  materials  or  labor  or  charges. 
For  instance,  in  the  shoe  business,  a  very  slight  saving 
in  the  use  of  leather  is  far  more  important  than  a  big 
saving  in  labor  charge. 

In  the  cloak  business  the  chief  item  of  expense 
is  materials  not  labor  or  charges,  and  usually  materials 
constitute  two-thirds  and  upwards  of  the  total  cost. 
Five  per  cent  saving  on  materials  would,  therefore 
effect  a  greater  saving  than  10  per  cent  reduction  of 
labor  expense. 

How  Much  Money  is  Spent  for  Materials? 
How  Much  Money  is  Spent  for  Labor? 
How  Much  Money  is  Spent  for  Charges? 

A  maker  of  men's  pants  was  asked  about  his  cost 
system  and  he  described  it: 

Fifty  Cents  for  Me 
Two  Dollars  for  Material 
Fifty  Cents  for  Labor 
Total  Costs  $3.00 

But  what  if  competition  forces  the  price  down  to 
$2.75? 


( 

: 

1^ 


Then — Fifty  cents  for  me. 

One  dollar  seventy-five  cents  for  materials. 
Fifty  cents  for  labor. 
Total  $2.75 
But  what  if  competition  still  further  forces  the 
price  down  to  $2.50? 

Then  again — Fifty  cents  for  me. 

One  dollar  fifty  cents  for  materials. 
Fifty  cents  for  labor. 
Total  $2.50 
This  was  a  good  cost  method. 

In  any  cost  system  the  first  thing  to  find  out  is 
how  much  all  Materials  cost,  how  much  all  Labor  costs, 
how  much  all  Charges  cost. 

Material  costs  mean  all  money  paid  out  for  mate- 
rials; includes,  therefore,  water  and  gas  as  well  as 
piece  goods  and  trimmings. 

Labor  costs  mean  all  money  given  persons  for 
services;  includes,  therefore,  lawyers'  fees. 

Charges  are  the  four  items  of  taxes,  insurance, 
depreciation  and  interest.  If  a  man  has  $10,000 
invested  in  his  business  he  must  charge  himself  with 
at  least  $600  interest,  and  if  part  of  his  $10,000  is 
invested  in  materials  that  are  losing  value,  he  must 
charge  himself  with  a  depreciation  charge  sufficient 
to  .cover  the  loss. 

Expenses  are,  therefore,  subdivided  into  mate- 
rials, labor  and  charges. 

But  it  is  not  only  the  price  paid  for  materials  that 
counts,  it  is  the  use  made  of  the  materials. 

Two  men  may  pay  exactly  the  same  price  per  yard 
for  materials,  but  one  man  makes  five  per  cent  more 
suits  or  cloaks  because  he  watches  the  cutting  losses. 
As  to  labor  it  is  not  only  the  price  per  hour  that  counts 
but  it  is  the  amount  turned  out  per  hour ;  and  charges 
come  down  when  more  business  is  done. 

The  man  making  cloaks  therefore,  will  have  a  very 
good  and  practical  system  of  costs  if  he  puts  on  one 

5 


^ 


i 


page  all  the  different  expenses  for  Materials,  on 
another  page  all  the  different  expenses  for  Labor,  and 
on  a  third  page  all  the  expenses  for  Charges. 

There  are  four  different  ways  he  can  lose  on 
materials : 

(1) 

He  can  buy  more  materials  than  he  actually  needs. 

He  might,  for  instance,  buy  500  yards  of  cloth  when 

he  only  needed  450. 

(2) 

He  can  use  in  a  garment  more  material  than  is 
actually  necessary.  For  instance,  he  might  put  on 
eight  buttons,  where  six  would  do. 

(3) 

He  may  pay  too  much  for  his  material,  perhaps 
$1.00  a  yard  when  he  ought  to  buy  it  for  $0.90. 

(4) 
He  may  make  a  wrong  use  of  materials — use  a 
pearl  button  where  a  bone  button  would  have  answered. 

The  duty  of  the  cloak  maker  is  to  go  over  each 
style  of  garment,  and  check  it  up  as  to  materials.  Let 
him  ask  himself  as  he  looks  at  the  expense  page  for 
materials :  Did  I  buy  too  much, — did  I  use  too  much, — 
did  I  use  too  high  a  quality  ? 

If  he  does  this  he  will  find  that  he  has  made 
plenty  of  mistakes,  and  that  these  mistakes  amount 
to  much.  If  he  has  bought  100  yards  when  95  would 
have  been  enough,  if  he  has  used  95  yards  when  90 
would  have  answered  the  purpose,  if  he  has  paid  $1.00 
when  he  ought  to  have  bought  for  $0.90,  if  he  has  used 
$0.90  material  when  $0.80  material  would  have  an- 
swered, he  is  losing  more  than  $0.25  on  every  dollar. 

What  is  true  of  materials  is  also  true  of  labor. 
The  manufacturer  should  look  at  the  sums  he  has  paid 
out  for  labor  and  ask  himself  as  to  every  man  and 
woman 

Have  I  had  more  labor  than  I  needed? 

6 


i^ 


> 


•r 


\  \ 


I 


Has  each  employe  worked  diligently? 

Have  I  paid  less  per  hour  or  more  per  piece  than 
I  ought  to  pay? 

Have  I  put  high  priced  employes  on  low  grade 
work? 

If  he  does  this,  he  will  find  that  he  has  made  here 
and  there,  all  four  mistakes. 

If  he  has  had  our  experience,  he  will  find  that  he 
is  paying  too  little  per  hour  and  too  much  per  piece. 

As  to  his  "Charges,"  which  he  must  also  carefully 
study,  he  may  find  that  he  is  paying  too  much  for  taxes 
and  insurance,  that  he  is  allowing  his  property  to  run 
down  too  rapidly,  and  that  his  interest  charges  are 
higher  than  if  his  credits  were  better. 

To  know  the  real  facts  as  to  materials,  as  to  labor 
and  as  to  charges  is  what  a  cost  system  is  for. 

If  every  expense  has  been  looked  at  from  these 
four  points,  if  no  wastes  are  occurring,  then,  and  not 
before,  is  it  of  some  value  to  distribute  burden  expenses 
to  different  departments.  This  may  never  be  neces- 
sary. If,  however,  it  is  considered  desirable,  this  is 
the  way  to  do  it. 

Distribute  all  the  indirect  expenses,  whether  mate- 
rials or  labor  or  all  charges  to  four  classes : 

Power  Expenses 
Maintenance  Expenses 
Supervision  Expenses 
Rent  Expenses 

This  Burden  expense  worries  a  great  many  people, 
accountants  included. 

What  is  most  important  is  to  keep  down  the 
Burden  expense,  not  to  apportion  it,  although  appor- 
tionment may  also  be  useful.  Every  item  of  Burden 
expense,  whether  Material  or  Labor  or  Charges,  ought 
to  be  checked  exactly  as  the  expenses  are  checked.  Is 
there  too  much,  is  too  much  used,  has  it  cost  too  much, 
is  too  good  a  quality  used? 

7 


k'*- 


But  it  will  help  mightily  if  expenses  are  subdivided 
a  little  more  definitely  than  merely  into  materials, 
labor,  and  charges;  it  is  advisable  to  subdivide  in 
order  to  see  more  clearly  where  losses  are  occurring. 
Accordingly  we  divide  material  expenses  into  two  main 
divisions  or  classes: 

A,     (a)     Materials  which  can  be  charged  direct  to 
manufacturing  orders. 

(b)  Materials  which  cannot  be  charged  direct  to 
manufacturing  orders. 

Under  (a)  are  classified  the  following: 

Piece  Goods 
Linings 
Trimmings,  Etc. 

Under  (b)  are  classified  all  other  materials  used 
in  the  business. 

A  similar  division  is  possible  with  labor  expenses, 
viz: — 

(a)  Direct  Labor,  or  Labor  which  can  be  charged 
direct  to  manufacturing  orders. 

(b)  Indirect  Labor,  or  Labor  which  cannot  be 
charged  direct  to  manufacturing  orders. 

Charges. — A  similar  division  could  also  be  made 
of  "Charges''  but  it  is  not  practicable  in  a  cloak  factory 
to  put  this  distinction  into  use. 

The  equipment  in  a  cloak  factory  directly  engaged 
on  manufacturing  orders,  such  as  sewing  machines, 
pressing  machines,  button  hole  machines,  all  have  too 
low  hourly  rates  to  justify  their  being  charged  directly 
to  manufacturing  orders. 

Accordingly,  all  "Charges"  may  be  considered  as 
not  directly  chargeable  to  manufacturing  orders. 

It  is  evident  that  such  expenses  as  cannot  be 
charged  directly  to  manufacturing  orders,  namely, 

Indirect  Material  Expense 
Indirect  Labor 
Charges 
are  what  is  called  "Overhead"  or  "Burden"  expenses. 

8 


4 


Hn 


>. " 


Such  material  expenses  as  coal,  electric  current 
purchased,  etc.,  are  classified  as  a  Power  Expense. 
Likewise,  such*  Labor  Expenses  as  engineers'  wages, 
electricians,  etc.,  are  classified  as  Power  Expenses. 

Materials  used  in  repairs  to  equipment  and  the 
labor  engaged  in  making  the  repairs  constitute  charges 
to  Maintenance.  Any  building  repairs,  however,  are 
classified  under  Rent. 

Supervision  expense  comprises  all  expenses  for 
materials  and  labor  which  do  not  readily  classify  as 
Power,  Maintenance,  or  Rent  Expenses. 

Rent    Charges: — The    term    is    self-explanatory, 

meaning  the  amount  paid  for  the  use  of  the  premises. 

Rent  charges  include  also  janitor's  wages  and  janitor's 
supplies  and  in  general  all  such  charges  as  an  owner 

pays  when  he  rents  his  building  to  another. 

Where  a  factory  owns  its  own  land  and  buildings, 
the  Rent  Charge  is  arrived  at  by  computing  taxes, 
insurance  and  depreciation  on  the  land  and  buildings 
plus  the  interest  on  the  money  invested  in  the  land  and 
buildings.  To  this  sum  is  added  the  janitor's  supplies 
and  wages,  and  the  cost  of  building  repairs,  and 
general  property  improvement. 

We  find  that  we  have  now  converted  the  total 
manufacturing  expenses,  first  stated  as  made  up  of 
expenses  for 

Materials 

Labor 

Charges 
into  expenses  for 

Direct  Materials  charged  to  manufacturing  orders. 
Direct  Labor  charged  to  manufacturing  orders. 
Power  Expenses. 
Maintenance  Expenses.  , 
Supervision  Expenses. 
Rent  Expenses. 

It  is  clear  that  we  cannot  as  yet  commence  to  get 
costs  on  individual  garments. 

9 


'4 


We  know  the  cost  of  direct  labor,  and  we  know 
this  for  each  manufacturing  department. 

Our  next  step  therefore,  is  to  apportion 

Power 

Maintenance 
Supervision 
Rent 

expenses  to  each  manufacturing  department,  and  each 
of  these  four  items  is  apportioned  on  a  rational  basis. 

Power,  for  instance,  may  include  the  cost  of  steam  ' 
heat,  and  electric  light  and  power. 

A  rational  basis  for  charging  each  manufacturing 
department  with  its  share  of  the  steam  heating  expense, 
is  on  the  basis  of  floor  area  occupied.  It  is  apparent 
that  a  manufacturing  department  occupying  a  large 
area  will  cost  more  to  heat  than  one  occupying  less 
floor  space. 

To  charge  a  manufacturing  department  for  the 
electric  light  and  power  used  by  it,  the  following 
method  is  suggested: 

Inventory  the  total  number  of  lamps  in  the  depart- 
ment with  the  number  of  watts  per  hour  each  lamp  is 
rated  to  use.  Divide  the  total  watts  by  746  which  will 
give  the  equivalent  H.P.  used  per  hour. 

In  addition  ascertain  the  H.P.  of  the  motors  used 
in  the  Department,  and  add  the  total  H.P.  required 
per  hour  by  the  motors,  to  that  required  for  light. 

Do  this  for  each  manufacturing  department  and 
charge  pro  rata. 

The  Curtis  Publishing  Co.,  Philadelphia,  Pa.,  has 
installed  meters  in  each  department,  thus  securing  the 
exact  consumption  of  current. 

It  is  not  of  great  importance  to  spend  a  great  deal 
of  time  accurately  subdividing  Power.  If  you  know 
about  what  the  Power  bills  or  expenses  for  the  year 
are,  any  man  of  good  sense  can  divide  them  up  pretty 
fairly    against    the    different    departments.      Do    not 

10 


^^         -^ 


attempt  to  distribute  to  departments,  the  power 
expenses  each  month.  Assess  so  much  a  month  and  at 
the  end  of  the  year  find  out  whether  the  assessment  is 
equal  to  the  expenses.  If  it  amounts  to  more  you  have 
made  an  extra  profit,  if  it  amounts  to  less  there  is  a 
small  loss  to  be  taken  care  of  which  can  be  carried 
forward  with  the  next  year's  power  bill  and  the  assess- 
ments be  slightly  raised. 

Maintenance — A  rational  method  of  apportioning 
maintenance  charges  to  manufacturing  departments, 
is  on  the  basis  of  value  of  manufacturing  equipment  in 
each  manufacturing  department,  and  charging  each 
department  pro  rata. 

Of  course,  where  maintenance  records  have  been 
kept  for  a  number  of  years,  showing  just  what  each 
manufacturing  department  has  required  in  the  way  of 
repairs  to  its  equipment,  then  each  manufacturing 
department  can  be  assessed  on  the  basis  of  past 
records,  which  are,  however,  very  rarely  of  much 
value.  Such  departmental  maintenance  records  should 
be  started  with  the  inception  of  such  a  cost  plan  as  this. 

Supervision — This  expense  should  be  apportioned 
to  manufacturing  departments  as  follows: 

In  each  manufacturing  department  find  the  sum 
of  the  department  payroll  plus  the  value  of  the  manu- 
facturing equipment  in  the  department. 

Of  course,  supervision  expense  incurred  and 
carried  on  for  a  specific  department  is  chargeable 
wholly  to  that  department,  as  for  instance,  clerks  and 
foremen  in  a  cutting  room  are  charged  to  cutting  room 
costs. 

Then  charge  each  manufacturing  department  with 
its  proportion  to  the  total  general  Supervision  ex- 
pense on  the  basis  of  payroll  and  equipment.  By  gen- 
eral supervision  expense  is  meant  such  items  of  super- 
vision expense,  either  labor  or  material,  which  cannot 
be  located  directly  to  a  department  as,  for  example, 

11 


A 


general  officers'  salaries,  general  accounting  expenses, 
etc. 

Rent — This  expense  is  reduced  to  a  cost  per  square 
foot  of  space  occupied  by  the  manufacturing  depart- 
ments and  each  department  is  charged  accordingly. 

In  addition  to  the  manufacturing  department, 
there  are  certain  departments  whose  activities  concern 
only  the  handling  of  materials,  namely, 

Receiving  and  Shipping 

Sponging 

Piece  Goods  Storage 

These  departments  are  assessed  with  charges  for 

Power 

Maintenance 
Supervision 
Rent 
on  the  same  basis  as  the  manufacturing  departments. 

Operating  costs  can  now  be  had  by  departments 
but  as  yet  it  is  not  possible  to  obtain  costs  on  individual 
garments. 

The  next  step  is  to  ascertain  what  per  cent  the 
sum  of 

Power 

Maintenance 

'illl^      Supervision 

Rent 

assessed  against  the  department  bears  to  the  payroll 
of  the  department. 

It  will  vary  in  the  different  manufacturing 
departments. 

In  the  cutting  department,  it  may  be  100  per  cent 
of  the  Direct  Labor  charged  to  manufacturing  orders. 

12 


In  the  tailoring  department  it  may  be  50  per  cent 
of  the  Direct  Labor  charged  to  manufacturing  orders. 

The  burdens  assessed  against  the  material  depart- 
ments, or  those  simply  handling  materials,  to  wit : — 

Receiving  and  Shipping  Departments 

Sponging  and  Inspection  Departments 

Piece  Goods  Storage 

are  not  assessed  as  a  per  cent  of  the  payroll,  but  instead 
are  added  to  the  payroll  of  these  departments,  includ- 
ing the  Purchasing  Department  payroll,  and  the  grand 
total,  known  as  a  Material  Burden,  is  ascertained  to  be 
a  certain  per  cent  of  the  total  value  of  all  materials 
used  in  making  the  garments. 

We  are  now  ready  to  assemble  the  costs  of  an 
individual  garment  from  the  raw  material  stage  to  the 
finished  product.  This  can  be  done  on  a  card  substan- 
tially as  follows : 


cost 


Style  No.  781 

Size  36 

Garment  No.  48326 


card 

Outline  No. 
Season— Fall 


1912 


Material  Cost 

Labor  Cost  and  Burden 

Piece  Goods 

yds.  at  $         per  yd.  $ 

Linings 

yds.  at  $         per  yd.  $ 

Trimmings                           $ 

Buttons 

at  $         per  gross  $ 

Silk  and  Cotton 

Soutache 

Weights 

Total        $ 

Cutting  Dept.  Labor       $ 
Dept.  Burden        % 

Tailoring  Dept.  Labor    $ 
Dept.  Burden        % 

Pressing  Dept.  Labor     $ 
Dept.  Burden        % 

Button  Sew'g  Dept.  Lab.  $ 
Dept.  Burden        % 

Skirt  Fin.  Dept.  Labor  $ 
Dept.  Burden        % 

Tot.  Labor  Cos t&  Burden  $ 
"    Mat'l     "    "      *'       % 

Material  Burden  p  c.          $ 

Total  Material  Cost 

and  Burden                   $ 

Total  Manufactured  Cost  $ 
Selling  Expense           % 

Commercial  Cost              $ 
Profit                            % 

Selling  Price                     $ 
Marked  to  Sell  for           $ 

13 


y 


If  we  take  the  value  of  the  materials  in  a  garment, 
and  add  to  this  value  the  material  burden  per  cent,  we 
get  the  entire  material  cost. 

We  next  take  the  expenses  of  the  manufacturing 
departments  that  made  the  garment.  These  expenses 
show  the  cost  of  direct  labor  in  each  department  with 
the  burden  or  overhead  in  the  department. 

The  cost  figures  up  to  this  point  represent  only 
production  cost.  All  selling  expenses,  commissions, 
traveling,  etc.,  have  been  excluded  from  consideration. 

Selling  expense  can  be  ascertained  as  a  per  cent 
of  the  production  cost  and  added  accordingly,  which 
will  give  the  commercial  cost. 

Profit  can  then  be  added  as  a  percent  on  the  com- 
mercial cost. 

With  regard  to  manufacturing  departments;  a 
manufacturing  department  is  one,  the  time  of  whose 
employes,  can  be  charged  direct  to  individual  garments. 

The  path  of  a  garment  from  the  piece  goods  stage 
to  the  finished  garment  is  substantially  as  follows : 

The  Cutting  Department  secures  the  piece  goods 
from  the  piece  goods  storage,  and  the  pattern  from  the 
pattern  maker,  and  a  cutter  then  cuts  the  garment. 

Cutting  cost  requires  special  consideration.  At 
one  time  the  cutter  may  be  cutting  30  garments  high, 
and  at  another  time  3  garments  high. 

It  is  obvious  that  we  cannot  use  either  of  the  above 
costs  which  are  accidental.  An  average  cutting  cost 
must  be  ascertained.  It  may  be  that  4  high  is  the 
average  lay  or  it  may  be  8  high.  When  the  average  lay 
has  been  determined,  the  average  cutting  time  must 
be  ascertained,  and  the  cost  of  the  work  divided  by  the 
number  of  garments  cut.  This  gives  the  cutting  cost 
per  garment, — that  is  the  Direct  Labor  cost  of  cutting 
the  garment,  to  which  must  be  added  the  burden  per 
cent  used  in  the  cutting  department. 

The  lining,  trimming  and  sorting  or  assembly 
departments  follow  next  in  order,  but  it  is  suggested 

14 


i 


4^ 


that  the  labor  expense  in  these  departments  be  carried 
into  the  overhead  or  burden  expenses.  The  reason  for 
this  is  that  the  work  performed  in  these  departments 
is  of  such  a  nature  as  to  not  readily  permit  taking  off 
costs,  per  garment ;  lining  costs  per  garment,  however, 
may  be  excepted  from  this  recommendation,  as  physical 
conditions  permit. 

The  garment  is  then  given  out  to  the  tailors. 
Where  the  work  goes  to  an  outside  tailor,  the  burden 
per  cent  on  the  direct  labor  cost  will  be  less  than  where 
the  work  is  done  on  the  premises. 

Work  done  outside  carries  a  burden,  but  this  bur- 
den is  made  up  only  of  a  portion  of  the  Supervision 
Expenses.  Outside  work  naturally  cannot  be  assessed 
for  Power,  Maintenance  or  Rent  expenses,  as  it  incurs 
none  of  these  expenses. 

Work  done  by  tailors  on  the  premises  carries  a 
burden  per  cent  on  the  Direct  Labor  representing  cost 
of  Power,  Maintenance,  Supervision  and  Rent  assessed 
to  the  tailoring  department. 

In  connection  with  the  tailoring  operations  we 
have  the  fore  pressing  and  the  finish  pressing.  With 
most  cloak  factories  the  cost  of  these  operations  is 
known,  due  to  the  work  being  done  at  a  set  price  per 
garment. 

To  this  price  must  be  added  the  department  bur- 
den, made  up  of  Power,  Maintenance,  Supervision  and 
Rent  charges  assessed  against  the  department  and 
shown  as  a  per  cent  of  the  Direct  Labor  payroll. 

The  next  operation  may  be  the  sewing  on  of  but- 
tons, which  cost  is  usually  a  known  one,  due  to  its  being 
a  price  per  100.  To  the  Direct  Labor  cost  is  added  the 
burden  expense  of  the  department. 

Where  a  skirt  finishing  department  is  separately 
maintained,  its  Direct  Labor  Cost  and  the  Department 
Burden  will  indicate  the  total  cost  in  that  department. 

The  Labor  Expense  in  the  balance  of  the  depart- 
ments, that  is  the  non-manufacturing  departments, 
such  as 

15 


Designing 

Pattern  Department 

Lining  (which  may  be  made  a  manufactur- 
ing department) 

Trimming 

Assembly 

Giving  Out 

Matching 

Finished  Garment  Stockroom 

busheling 

Accounting 

is  classified  as  a  Supervision  expense.  In  addition,  the 
salaries  of  administrative  officers,  superintendents, 
examiners,  supervising  foremen,  foreladies,  and  models 
are  classified  under  Supervision. 

The  salaries  of  models  who  are  continuously  in  the 
salesroom  do  not  enter  into  Production  Cost,  but  are 
included  in  the  selling  expense. 

The  expense  of  an  advertising  department,  and  all 
advertising  supplies  also  come  under  selling  expense. 

In  figuring  profit  it  should  be  borne  in  mind  that 
when  figuring  ''Charges"  (or  expenses  neither  for 
materials  or  labor)  interest  was  allowed  on  the  money 
invested,  also  depreciation.  The  rate  of  interest  can 
be  6  per  cent  and  it  is  suggested  that  a  flat  rate  be  used 
for  depreciation.  What  this  flat  rate  is,  each  must 
determine  for  himself.  10  per  cent  a  year  from  value 
is  often  used. 

When  computing  piece  goods  prices,  the  freight 
and  express  should  be  added  to  the  net  cost  of  the 
goods,  that  is,  invoice  price  less  discounts. 

A  garment  may  actually  take  three  and  three- 
fourths  yards,  but  an  allowance  must  be  made  for  the 
following  items : 

16 


REDUCTION 


RATIO 


14:1 


w 


.a^ 


b 

3 


Q) 

Is 

T3  ^ 


go 

N  CO 
CT>X 

^-< 

OOM 

o 


A^ 


A^ 


3 
3 


00 

3 
3 


o  > 

09.0 


Is 

N   CO 

CX)M 
O 


'-S', 


Vj^ 


3 
3 


> 

o  m 

(D  O 

S3  I 

^  o  o 

Ocrt  ;o 


X 

N 


.-v^ 


> 


A^' 


in 

O 

3 
3 


•^ 


<^^   '* 

V 


.'V^ 


> 

en 


A^ 


^. 


.".> 


.'V?' 


%^^ 

VlA 


M 


S 

3 

3 


.t>">b. 


V 


^C. 


fp 


&■ 


r^iicEEisi; 


n 


o   Ho. 


00 


o^ 


00 


I 


b 


% 


& 


f^ 


v^ 


2.0  mm 


ABCOEFGHIJKLMNOPORSTUVWXYZ 
atx;delgh(|klmnopQrstuvwxyzl234567890 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 
abcdefghijklmnopqrstuvwxyzl234567890 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 

abcdefghijklmnopqrstuvwxyz 

1234567890 


^^'^^. 


^^,A. 


I'" 


'/^ 


4^ 


m 

H 
O 

o 

-o  m  -o 

>  C  CO 
I  13  ^ 

m 

O 
m 


Ol 

3 
3 


^j 


% 


"^ 


:V 


x^^ 


2.5  mm 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 

abcdefghijklmnopqrstuvwxyz 

1234567890 


^-^/^. 


'^.^^^. 


'/^ 


M 
CT 


IS 

■D  p 


><  X 

N  CO 

**< 

^-< 

OOtsi 

to 
o 


b 

3 

3 


0) 

CT 
o  >> 

I" 

£5.0 

Is 


><  :o 

•^  CO 

^-< 

oorsi 
o 


3 

3 


> 

CD 
0,0 

o  m 

(T>  O 

^  O  O 

X   < 
X 

-< 


TAKEN   FROM    LAST   YEARS   RECORDS 
FOR   SAME   SEASON 


TOTAL     $    lOOpOO 


COST     DIAGRAM 


FOR 

nat*l.    cloak,   suit     and 
manufacturer's 

BY 

the         EMERSON 

NEW    YORK  PITTSBURGH 

T,  B.  M. 


SKIRT 


ASSOCIATION 
CO 


CHICAGO 
n-20-12 


EXPENSES      FOR 

MATERIALS 


DIRECT 


INDIRECT 


TOTAL 

"chargEo 


MATERIALS 
To 


MFG. 


ORDERS 


PIECE    GOODS       $  50000 


LININGS 


TRIMMINGS 


5  OOP 
5000 


TOTAL 


$  eopoo 


ALL     OTHER      EXPENSES 


FOR     MATERIALS     CLASS!- 


FIED    AS    FOLLOWS: 


POWER    MATERIALS    Z  750 


MAINTENANCE 


200 


SUPERVISION 


RENT     MATERIALS 


1000 
50 


EXPENSES       FOR 

LABOR 


DIRECT 


LABOR     IN     MFG.    DEPTS, 


CHARGED    TO      MFG. 


ORDERS 


$   2:^000 


TOTAL 


$   2QOO| 


TOTAL 


I    25pOO 


DIRECT 
MATERIALS 


DIRECT 
LABOR 


$  25,000 


INDIRECT 


ALL     OTHER      LABOR 


EXPENSES    CLASSIFIED 


AS      FOLLOWS: 


POWER    LABOR        ^  1200 


MAINTENANCE 


2000 


SUPERVISION 


RENT   LABOR 


1 5.000 
800 


TOTAL 


$   19/DOO 


EXPENSES     FOR 

CHARGES 


DIRECT      AND      INDIRECT 


TAXES 


INSURANCE 


ON     AMOUNT     INVESTED 


INTEREST 


IN       BUSINESS 


SUMMARY 


MATERIALS 
LABOR 
CHARGES 
TOTAL 


$  62POO 

44000 

4000 

I  nqpoo 


DEPRECIATION 


(  THIS     AMOUNT     CLASSIFIED      AS      A 
SUPERVISION        EXPENSE)  "" 


$    1500 


RENT 


2500 


TOTAL 


$   4000 


POWER 


MATERIALS 


$    750 


LABOR 


1200 


TOTAL 


$  1950 


DIRECT        MATERIALS 


MATERIAL 
HANDLING    DEPTS 


POWER 


$     380 


MAINT 


220 


SUP^N 


2000 


RENT 


1000 


TOTAL     BURDEN       36OO 


DEPT.    PAYROLL         1000 


GRAND    TOTAL     ^  4600 


OR    8*^  ON   VALUE    OF 


DIRECT       MATERIALS, 


A      MATERIAL      BURDEN 


MAINTENANCE 


MATERIALS 


$  200 


LABOR 


2000 


TOTAL 


$   2200 


CUTTING  DEPTS 


POWER 


$     95 


MAINT. 


110 


SUP  N. 


3000 


RENT 


300 


TOTAL    BURDEN       3505 


DIRECT    LABOR 


2000 


TOTAL     COST       ^  5505 


%  BURDEtsi      TO 


PAYROLL 


17 


^ 


INSIDE     TAILORS 


POWER 


$    760 


MAINT. 


1100 


SUP*N. 


6000 


RENT 


1350 


TOTAL   BURDEN         92IO 


DIRECT    LABOR        »7»000 
TOTAL     COST     $  26^10 


14   BURDEN     TO 

LABOR  54% 


OUTSIDE    TAILORS 


SUPERVISION 


MATERIALS 


$   1000 


LABOR 


15.000 


CHARGES 


1500 


TOTAL 


$   1 7,500 


POWER 


MAINT. 


SUP'N 


^     3000 


RENT 


TOTAL    BURDEN     3000 


DIRECT    LABOR     .  3 GOO 
TOTAL    COST      4  6000 


<^  BURDEN    TO 


LABOR 


lOOyo 


RENT 


MATERIALS 


$      50 


LABOR 


800 


CHARGES 


2500 


TOTAL 


$  3350 


FORE    AND  FINISH 
PRESSERS 


POWER 


T"570 


MAINT. 


55  O 


SUP'N. 


1500 


RENT 


400 


TOTAL  BURDEN        3020 


DIRECT   LABOR 


2000 


TOTAL    COST        |  5020 


% BURDEN    TO 


LABOR 


t5l^ 


BUTTON       SEWING 


POWER 


$     50 


MAINT. 


SUPN. 


500 


RENT 


200 


TOTAL    BURDEN 


750 


DIRECT   LABOR  5 GO 

TOTAL   COST         $  1250 


^^  BURDEN     TO 


LABOR 


150% 


Wc 


SKIRT      FINISHING 


POWER 


$     95 


MAINT. 


220 


SUP'N. 


5  GO 


RENT 


10G 


TOTAL   BURDEN 


915 


DIRECT    LABOR 


50G 


TOTAL    COST         $   1415 


^o  BURDEN    TO 

LABOR  183% 


SUMMARY 


DIR.  MATLS. 

$ 

eopoo 

DIR.  LABOR 

2^00 

POWER 

1950 

MAINT. 

2200 

sup'n. 

i":j50o 

RENT 

3350 

TOTAL 

$ 

nopoo 

SUMMARY 


DIR.  MATLS. 
BURDEN 
MAt'u  COST 
DIR.    LABOR 
BURDEN 
TOTAL 


$   6QDOO 

4600 

6A600 

25iOOO 

20,400 
$    11QOOO 


REDUCTION 


RATIO 


12:1 


> 

DO 
O 

a 

m 

"n 

O 


O 
O 

C/) 


X 

-< 
M 


V. 


^^ 


61 

3 
3 


> 
OD 

0,0 

o  m 


CD  O 


CaJ^i— 

^  o  O 

CO 


< 
N 


X 

M 


vT*.^ 


^. 


.'^ 


.'^■ 


■v^ 


^.: 


e 


^e 


'^  n\ 


:V 


.>v 


''^ 


> 


o 

3 
3 


sZ: 


> 

Ul 


<^ 


&>. 


-V^ 


^«.^^ 


O 

o 

3 

3 


C/1 


O 


■^  i^  I 


00 


00 


o- 


00 


b 


ro 
In 


1.0  mm 


1.5  mm 


2.0  mm 


ABCDEFGHUKLMNOPQRSTUVWXYZ 
abcdefghi|klmnopqrstuvwxy2l234567890 


ABCDEFGHUKLMNOPQRSTUVWXYZ 
abcdefghijklmnopqrstuvwxyzl234567890 


ABCDEFGHUKLMNOPQRSTUVWXYZ 

abcdefghijklmnopqrstuvwxyz 

1234567890 


2.5  mm 


ABCDEFGHUKLMNOPQRSTUVWXYZ 

abcdefghijklmnopqrstuvwxyz 

1234567890 


.<^ 


r.^-^' 


<^ 


Ik 


-^ 


^^ 


^o 


f^ 


Hs- 


to 


..^^^ 


rX^^ 


%*      \c 


^■^ 


^o 


f<p 


f^ 


^fcr 


m 

O 
O 

■o  m  "0 
>  c  CO 

I  TJ  J^ 

0(/)    5 
m 

3D 
O 

m 


^o 


i^ 


h- » 

hO 

CJl 

0 

3 
.J 

3 
3 

&I 

CT 

0) 

O" 

,=rO 

0  >, 

^0 
21m 

z^ 

FGH 
jkIm 

3  X 

IJKLMN 
nopqrst 

IJKLMN 
nopqrst 

1  "0 

<2 

50 

Kc 

N  C/) 

^< 

iT^-i 

5;^ 

Nc 

CT^X 

00^ 

^-< 

OOM 

cn< 

0 

<T>X 

"vJ-C 

00!SI 

VO 

0 

-r:^. 


^. 


^. 


'^ 


'A. 


Shrinkage  in  Sponging 

Increased  Yardage  for  Large  Sizes 

Cutting  Waste 

Loss  Due  to  Imperfect  Cutting 

The  extra  yardage  usually  allowed  varies  from 
one-eighth  yard  to  three-eighths  yard. 

See  chart 

The  accompanying  chart  shows  graphically  the 
classifying  of  all  manufacturing  expenses  into  the  three 
main  divisions  of 

Materials 
Labor 

Charges 

followed  by  the  sorting  of  these  items  into  six  expense 
divisions,  viz: — 

Cost  of  Material  Charged  to  Manu- 
facturing Orders 

Cost  of  Labor  Charged  to  Manufac- 
turing Orders 

Power  Expense 

Maintenance  Expense 
Supervision  Expense 
Rent  Expense 

The  next  line  shows  the  manufacturing  depart- 
ments, the  amount  of  direct  labor  in  each  department, 
the  burden  expenses  charged  the  department,  the  latter 
amount  being  expressed  as  a  per  cent  on  the  Direct 
Labor  Cost  of  the  department. 

In  addition,  the  material  handling  departments 
are  shown,  with  the  burden  expenses  assessed  against 
them,  and  to  this  sum  has  been  added  the  payroll  of  the 
departments — the  grand  total  being  expressed  as  a 
per  cent  on  the  value  of  the  materials  used  in  manu- 
facturing orders. 

17 


The  chart  starts  off  with  the  total  manufacturing 
expenses  as  revealed  by  last  year's  records  for  the  same 
season. 

Where  a  change  in  the  styles  indicates  that  there 
will  be  a  considerable  difference  in  the  value  of  the 
materials  used  in  manufacturing,  compared  to  the 
value  of  last  season,  a  forecast  must  be  made  of  the 
probable  amount  to  be  used,  and  this  amount  used  as 
the  base  for  figuring  the  material  burden  per  cent. 

Similarly,  if  it  is  clearly  indicated  that : 

Power  Expenses 

Maintenance  Expenses 

Supervision  Expenses 

Rent  Expenses 

for  the  coming  year's  season  are  likely  to  increase 
sharply  over  last  year's  season's  expenses  (the  increase 
being  due  either  to  the  styles  or  other  causes),  a  fore- 
cast must  be  made  as  to  the  amount  of  the  increases, 
and  the  amount  added  to  last  year's  season  expenses, 
for: 

Power 

Maintenance 

Supervision 

Rent 

and  assessed  to  manufacturing  departments. 

At  the  end  of  the  season  if  the  actual  expenses 
paid  out  for 

Power 

Maintenance 

Supervision 

Rent 

are  more  than  the  expenses  charged  for  these  items  on 
manufacturing  orders  the  deficit  is  to  be  added  to  next 
year's  burden. 

18 


->  I  r 


On  the  other  hand  if  the  actual  expenses  are  less 
than  the  burden  collected  on  manufacturing  orders, 
then  an  extra  profit  has  been  made. 

It  has  been  assumed  that  the  amount  of  Direct 
Labor  will  remain  fairly  constant  year  to  year.  Where 
a  radical  increase  or  decrease  in  the  manufacturing 
force  is  contemplated,  this  fact  must  be  taken  into 
consideration  when  ascertaining  the  payroll  of  each 
manufacturing  department. 


19 


■y 


j!t^fr»ig  ■"■A-_— ' 


N:^t5> 


I 


1* 


r — — 

• 

i 

^ 

HfT*:-            .n,,,, 

i 


COLUMBIA  UNIVERS  TY  LIBRARIES 


0041405269 


-^ 


^^" 


\ 


END  OF 
TITLE 


